CHANDRASHEKHAR LEENA AND ANOTHER v. CHUNG WAI HAN VIKKI t/a GARIE

DCCJ 4874/2019

[2021] HKDC 560

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4874 OF 2019

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ASSESSMENT OF DAMAGES

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INTRODUCTION

1.  This is the hearing for assessment of damages of the 1^st and 2^nd plaintiffs’ claim against the defendant arising from the breach of contract concerning the renovation works.

2.  Essentially, the plaintiffs say that the defendant breached the contract entered between them by failing to complete the renovation works within the (extended) terms of the contract.  As a result of the breach, the plaintiffs needed to engage another contractor to complete the unfinished works and to seek alternative accommodation between the original completion date and the actual completion date.  They therefore claim against the defendant for:-

(1)  Their costs for engaging a contractor to complete the remaining works left by the defendant, less the outstanding balance of the original contract price; and

(2)  their costs of alternative accommodation.

3.  In absence of any notice of intention to defend, an interlocutory judgment was entered against the defendant on 7 November 2019.

4.  After the plaintiffs took out the notice of appointment of assessment of damages, the defendant attended the direction hearings in person.  She later applied to the court for setting aside the default judgment.  The defendant’s application was dismissed by the court in June 2020.  The assessment of damages was set down by Master Rita So on 22 January 2021.  In pursuance of the order made by the learned Master on the same day, the hearing was fixed to be held before me on 4 May 2021.

5.  Neither party is legally represented in this action.  While the plaintiffs attended the hearing in person, the defendant was absent.  I notice that a sealed copy of the said order of Master Rita So was sent to the defendant at her last known addresses, and the post was not returned undelivered.  Furthermore, at the beginning of the hearing, the 2^nd plaintiff confirmed that the updated trial bundle index was sent to the defendant on 16 April 2021 by ordinary post.  Upon the undertaking given by the 2^nd plaintiff to file an affirmation of service proving the said index had been duly served on the defendant, I was satisfied that the defendant should have been aware of this hearing.  I therefore proceeded with the assessment of damages in her absence.

6.  At the end of the hearing, I indicated that a written decision would be handed down on 11 May 2021.  This is my decision.

ANALYSIS OF EVIDENCE

7.  In the present case, the 1^st and 2^nd plaintiffs (and in this decision they will be collectively referred to as the plaintiffs) both filed their respective witness statements^[1]. Pursuant to the order of Registrar Lui dated 30 June 2020, leave was granted for the plaintiffs to rely on their witness statements as examination in chief. The 2^nd plaintiff was also testified at the hearing.  I find the 2^nd plaintiff’s oral testimony to be credible and consistent with the documentary evidence adduced in this case.

8.  No expert evidence was adduced in this assessment of damages.

9.  Having considered their contents, I give full weight to the documents adduced before me by way of documentary evidence.  Save and except the clarification regarding the plaintiffs’ payments to the contractor (which I will deal with in [23] below), I find that most of the documents are inherently plausible and consistent with one another.

10.  The plaintiffs also included in the hearing bundle the 2^nd plaintiff’s affirmation^[2], which was made in opposition to the defendant’s summons for setting aside default judgment.  I have also considered the said affirmation together with the exhibits referred thereto.  I find this affirmation evidence (together with exhibits) consistent with the documentary evidence adduced before the court.  I also find that this evidence is inherently plausible. I will also give due weight to it.

11.  The defendant did not appear at the hearing and did not adduce any evidence contradicting the plaintiff’s case.  In such circumstances, I accept the plaintiff’s evidence as unchallenged.  I accept the plaintiffs’ witness statements, the 2^nd plaintiff’s oral testimony, the 2^nd plaintiff’s affirmation, and the documentary evidence in their entirety.  I find that the plaintiffs have proved their case as set out below.

THE PLAINTIFFS’ CASE

12.  The 1^st plaintiff is the sole owner of a flat situated at The Belcher’s, Pok Fu Lam, Hong Kong.  The 2^nd plaintiff is her husband. In about February 2018, the plaintiffs engaged the defendant to carry out renovation works in the flat.  A contract was entered on 21 February 2018^[3].

13.  According to the contract, the total price was $650,000 and the working period was between 22 March 2018 and 22 June 2018.  Detailed payment terms^[4] and working schedule^[5] were also contained in the contract.

14.  The plaintiffs paid the initial deposit of $26,000 on 23 February 2018^[6], and the first instalment of $169,000 on 12 March 2018^[7]. The plaintiffs later became wary about the fact that the work progress had been lagged behind and the defendant could not give a reasonable explanation for it.  At one point, the plaintiffs reported the matter to the police for investigation, but they were told by the police that the dispute was only a civil matter[8]. The parties later came to an agreement, according to which payment terms and work schedule were revised^[9]. The completion date was revised to 5 July 2018.

15.  In May 2018, the plaintiffs made 3 further payments amounting to a total sum of $315,000^[10]. Another payment of $75,000 was made on 6 June 2018^[11].  By the time of making the June payment, the plaintiffs had paid 90% of the contract price.  Apparently, the progress of work did not match up proportionally with the payments.  It appears that by then the deadline for completion was postponed to 15 July 2018[12].

16.  Evidence shows that the plaintiffs became concerned again about the progress of the renovation works in late June 2018.  By an email dated 27 June 2018, the 1^st plaintiff reminded the defendant to complete the work by the agreed deadline on 13 July 2018^[13]. The 1^st plaintiff sent another lengthy email to the defendant on 4 July 2018 complaining the lack of progress of the works^[14].  An additional sum of $7,000 was paid to the defendant on 11 July 2018^[15] for the extra works of light slot.  The total amount paid by the plaintiffs to the defendant is therefore $592,000 ($26,000 + $169,000 + $315,000 + $75,000 + $7,000).

17.  The defendant failed to complete the project by the agreed deadline.  By an email dated 23 July 2018, the 1^st plaintiff complained about the progress of the work and the defendant’s failure to return her calls or messages^[16].

18.  According to the WhatsApp messages exchanged between the parties at the material times, there were discussions starting from late August 2018 that the defendant would bear the plaintiffs’ costs for the alternative accommodation at a hotel^[17]. In a letter dated 6 September 2018, the defendant agreed to pay the rent for the hotel in September and promised to complete the works by the end of September^[18]. By another handwritten letter signed by the defendant dated 2 November 2018, the defendant agreed to pay the plaintiffs’ hotel fees for September and October 2018 and would adjust the outstanding balance accordingly.  She also promised to reimburse the plaintiffs’ costs for alternative accommodation in the following months if she could not finish the work by the deadline^[19].  It appears that the completion date had once again been postponed to 30 November 2018^[20].

19.  The defendant signed another handwritten note dated 24 November 2018^[21]. The contents were similar to the previous one, except that the completion date was revised to 14 December 2018.

20.  However, the defendant failed to complete the renovation works by the deadline.  There was a meeting between the parties at the defendant’s office on 18 December 2018^[22]. On the following day (19 December 2018), the defendant emailed a revised work schedule to the 1^st plaintiff, according to which the project would be completed by 25 January 2019^[23].

21.  According to the plaintiffs, there had not been any progress of work after the sending of the said revised work schedule on 19 December 2018.  They made enquiries with the defendant as to when the renovation works were to be recommenced, and the defendant replied there would be delay because of the opening of her new office^[24]. Subsequently, the 1^st plaintiff sent an email to the defendant on 11 January 2019 indicating that, unless the renovation work would be commenced on the following day, the plaintiffs would institute a legal action against her^[25].

22.  The parties could not come to a consensus as to how the renovation works were to be proceeded with.  Eventually, on 27 January 2019, the 1^st plaintiff sent an email to the defendant indicating that they would engage another contractor to complete the works and terminating the contract with the defendant^[26].

23.  The plaintiffs entered a contract with Checkin Engineering Co (“Checkin”) to complete the remaining works left by the defendant.  According to the quotation dated 26 January 2019, the contract price was $452,000^[27].  However, the evidence adduced by the plaintiffs only indicates that they had made 11 payments in a total sum of $393,400^[28]. The 2^nd plaintiff explained at the hearing that some of the money were paid by cash; and, despite the plaintiffs’ requests, no receipt was issued by Checkin concerning such cash payments.  He testified that full sum had been paid to Checkin.  In absence of any evidence to the contrary, there is no reason for me not to believe the 2^nd plaintiff’s testimony.  I therefore find as a matter of fact that the plaintiffs did pay a total sum of $452,000 to Checkin.

24.  In the statement of claim, the plaintiffs claim against the defendant for a lump sum of $707,300.  For the sake of clarity, I will in this decision divide their claim into two separate heads.  The first head is their costs of reinstatement of the renovation works, namely the total sum they actually paid for the renovation work ($592,000 + $452,000) less the contract price with the defendant ($650,000).  The net amount under this head is therefore $394,000.  Secondly, because of the defendant’s breach, the plaintiffs say they had to seek alternative accommodation between September 2018 and May 2019.  They claim against the defendant under this head in the sum of $313,300.  Their total claimed amount is $707,300 ($394,000 + $313,300)^[29].

LEGAL PRINCIPLES

25.  As I mentioned earlier, neither party in this case is legally represented.  I therefore do not have the benefit of assistance from the parties on the governing legal principles.  Having said that, the relevant legal principles are well-established and should not be subject to any serious dispute.  The starting point is the House of Lords’ decision in Johnson v Agnew^[30], where Lord Wilberforce stated thus:-

“The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do, in the same position as if the contract had been performed…”

26.  In the same rein, Mr Justice Gill said the followings in Pamax Ltd v Cross Max Interiors Ltd^[31]:-

“94. The general, well-settled rule applicable to the measure of damages for breach of contract is that the successful claimant is entitled, so far as money can do it, to be put in the same or as good a situation as if the contract had been performed, provided he has first taken all reasonable steps to mitigate that loss; see British Westinghouse Electric and Manufacturing Co. Ltd v Underground Electric Railways Co. of London Ltd [1912] AC 673; in particular, the dicta of Viscount Haldane LC at p.688:

“The quantum of damage is a question of fact, and the only guidance the law can give is to lay down general principles which afford at times but scanty assistance in dealing with particular cases … Subject to these observations I think that there are certain broad principles which are quite well settled.  The first is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed.  The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach …”

95. This is no less apposite when the measure of damages has to be determined for defective building work. Dealing with such a case, Lord Cohen, in East Ham Corporation v Bernard Sunley & Sons Ltd [1966] AC 406, said at p.434:

“the learned editors of Hudson’s Building and Engineering Contracts, 8th ed. (1959) say at p.319 that there are in fact three possible bases of assessing damages, namely, (a) the cost of reinstatement; (b) the difference in cost to the builder of the actual work done and work specified; or (c) the diminution in value of the work due to the breach of contract.  They go on: ‘There is no doubt that wherever it is reasonable for the employer to insist upon reinstatement the courts will treat the cost of reinstatement as the measure of damage.’  In the present case it could not be disputed that it was reasonable for the appellants to insist upon reinstatement and in these circumstances it necessarily follows that on the question of damage the trial judge arrived at the right conclusion. ”

96. In Bellgrove v Eldridge (1954) 90 CLR 613, the High Court of Australia after referring to the same point in an earlier edition of Hudson, said at p.617:

“The measure of the damages recoverable by the building owner for the breach of a building contract is … the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract …”

27.  Bearing these principles in mind, I now turn to the plaintiffs’ heads of claim, namely (1) the costs of reinstatement, and (2) the costs of alternative accommodation.

DISCUSSION

(1)      Costs of reinstatement

28.  The learned editors of Chitty on Contract stated that “In a contract to perform services or for work and materials it will be assumed that the claimant will have the incomplete or defective performance completed or corrected and the damages will be assessed by the costs of getting this done.”^[32]  There is no reason for me to doubt the validity of this legal proposition.

29.  Accordingly, the plaintiffs are entitled to claim against the defendant for the costs of completing the renovation works.  As I have found above, the plaintiffs paid Checkin for finishing the remaining works left behind by the defendant in a total sum of $452,000.  In absence of any evidence challenging its reasonableness, I am prepared to accept the figure as reasonable.

30.  As mentioned above, the total claim amount is therefore $394,000, namely the actual amount paid by the plaintiffs in the whole project less the original contract price (ie, ($592,000 + $452,000) – $650,000).

31.  However, after cross-checking the quotations prepared by the defendant with those by Checkin, I find that some of the items quoted by Checkin were not covered in the defendant’s quotations.  I raised this query with the 2^nd plaintiff when he testified at the hearing.  In response, the 2^nd plaintiff was able to explain some of the items^[33] and argued (to my satisfaction) that they were actually covered by the defendant’s quotations.  But he admitted that there were some items which he could not explain.

32.  Insofar those items that the 2^nd plaintiff could not provide any explanation are concerned, I find that they are not covered by the defendant’s quotations.  I am not satisfied that these works were corrections of the unfinished works left behind by the defendant.  Accordingly, I hold that these items are not recoverable in law.  The non-recoverable items are as follows:-

Item No in Checkin’s quotation	Description of works	Amount
2.2	Supply and install marble door threshold to bathrooms and Helper Room	$3,600
4.9	Small cabinet in guest room for temple	$8,000
7.7	Work desk/study table at Master Bedroom	$5,000
10.1	Mirror one at the back of girl room and one at master bedroom wardrobe door	$3,000
10.2	Steel rod for drying clothes in helper room	$800
10.3	Storage in master bedroom ceiling	$6,800
10.6	To amend the wrongly designed bed at one Bedroom	$3,600
	Total:	$30,800 ======

33.  Accordingly, I would deduct the said sum of $30,800 from the amount claimed by the plaintiffs under this head.  The sum I would award under this head is therefore $363,200 ($394,000 - $30,800).

(2)      Costs of alternative accommodation

34.  The second head of claim is the costs of alternative accommodation.  By the email dated 27 June 2018^[34], the plaintiffs had informed the defendant of their rental of service apartment during the renovations.  Clearly, by that time (if not earlier), the defendant should have been aware of the fact that extra costs for alternative accommodation would be incurred if the renovation works did not complete on time.  The plaintiffs’ loss was therefore foreseeable insofar as the defendant is concerned.

35.  Furthermore, as mentioned earlier, the defendant had issued three letters on 6 September 2018, 2 November 2018, and 24 November 2018^[35] that she would pay the plaintiffs’ rental costs of the service apartment for September and October 2018 by adjusting the remaining balance of the contract price.  In the last two letters, she also promised that she would reimburse the rental costs for the following months on the proof of the rents paid.

36.  In the present case, the reinstatement works were not complete until May 2019.  The plaintiffs claim their costs of alternative accommodation for 7 months between September 2018 and May 2019.  According to the receipts produced by the plaintiffs as well as the resident certificate issued by Cosco Hotel^[36], the rent was $34,000 for September 2018^[37], $38,100 per month from October to December 2018 (3 months)^[38], $33,000 per month from January to May 2019 (5 months)^[39]. The 2^nd plaintiff also testified that the different rates are due to the fluctuation of the hotel’s seasonal fees.

37.  Accordingly, the total rental costs for alternative accommodation were $313,300 (ie $34,000 + ($38,100 per month x 3 months) + ($33,000 per month x 5 months)).

38.  I am satisfied that the costs of alternative accommodation were reasonably incurred and are recoverable in law^[40]. I would award this head in full.

(3)      Summary of awarded amount

39.  In summary, I would award in favour of the plaintiffs a total sum of $676,200 (ie $363,200 + $313,000).  Judgment will be entered in that figure.

INTERESTS

40.  While the plaintiffs have not made any submissions in respect of interests, they did claim for the same in the Statement of Claim.

41.  It is trite that interest is awarded to compensate the plaintiff for being kept out of money which ought to have been paid to him^[41].  In the present case, I am satisfied that the plaintiffs had already paid for the costs for the works done by Checkin, as well as the costs of alternative accommodation.  In the circumstance, I would exercise my discretion to award pre-judgment interests at the usual rate of 1% above the HSBC best lending rate starting from the date of the Writ of Summons, ie 9 September 2019, until the date of this assessment.  There shall also be post-judgment interests thereafter at the judgment rate until full payment.

COSTS

42.  In pursuance of O 62, r 28A(3) of the Rules of the District Court, and in absence of any evidence that the plaintiffs had suffered any loss in doing any work in this action, I am only prepared to award a hourly rate of $200 for the plaintiffs’ times in handling the present proceedings.  On a board-bush approach, I find that 50 hours would be reasonable time for the plaintiffs to be spent on these matters, bearing in mind the complexity and nature of the case.

43.  Accordingly, I would fix the plaintiffs’ costs of this action at $10,000 (ie $200 per hour x 50 hours).

DISPOSITION

44.  For the reasons as aforesaid, I enter a final judgment in the favour of the 1^st and 2^nd plaintiffs against the defendant in the sum of $676,200, together with interests thereon at 1% above the HSBC best lending rate from 9 September 2019 to the date of this assessment and thereafter at the judgment rate until full payment.

45.  I also order that the defendant shall pay the plaintiffs’ costs of this action, including this assessment of damages, summarily assessed at $10,000, payable forthwith.